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Get Financially Fit in the New Year

The start of a new year is typically the time to reset and refresh. New Year’s resolutions are made and many are hopeful that by the next December, their resolutions will have been met and they’ll be able to look back proudly upon all the progress made that year.

Health and fitness goals are some of the most common resolutions made from year to year. According to one poll on 2018 resolutions, such topics made up 37% of all goals among Americans who planned on making a resolution.1 However, January is also as good a time as any to focus on getting “financially fit.” “Save more money” or “spend less” are two of the most popular financial resolutions—yet there is much more to getting financially fit than vowing to modify your habits.1

“A goal without a plan is just a wish.” – Antoine de Saint-Expéry, French author

Setting resolutions can feel productive. Yet without distinguishing clear steps to follow through on how you’ll stick to your resolution(s), it can be all too easy to fall back into your old ways by February. To help get you going, here are some tips to help you start and stay the course to financial fitness throughout 2018:

1) Identify your goals.

Taking on too much at once can feel overwhelming and cause you to stray from your goals. For help in identifying your goals for the year, your financial advisor can be a valuable resource in deciding what to focus on, as well as helping you to see the big picture of how your goals for this year can support your financial strategy in the long run. Once you identify what your goals will be, use the S.M.A.R.T. goal-setting process to help make your goals more realistic and attainable. S.M.A.R.T. is an acronym for Specific, Measurable, Achievable, Relevant and Time Bound, first coined in the Management Review journal in 1981.2 For example, for the goal of “establish an emergency savings fund,” you would complete something similar to the following:

Measurable: “I will contribute $X amount to this fund at the beginning of each month.”

Achievable: “This goal is achievable if I cut down on certain disposable expenses such as dining out and entertainment by $X amount each month.”

Relevant: “This goal is relevant as I need to establish an emergency savings fund in order to be financially prepared in the event that an unexpected expense or incident occurs.”

Time Bound: “I will accrue enough funds for 3 months’ worth of living expenses by June of 2018 and enough funds for 6 months’ worth of living expenses by December of 2018.”

While this process may seem tedious to complete, it will immediately get you thinking about what needs to be done to accomplish the goal. It can also help you decide which goals are of the most importance to you and your family and what should be prioritized according to your values.

2) Define a plan.

You’ve already gotten a head start by defining each step of the S.M.A.R.T. process—now you need to finish setting up your plan. To continue on with the example goal of establishing an emergency savings fund, you could set up automated payments to contribute money at the beginning of each month into your fund. Then, set calendar reminders at the end of the month, or whenever makes the most sense for you, to determine if you have additional money to contribute.

Breaking up your goal into smaller, more attainable segments could also factor in to your plan. Instead of setting a goal of “saving $10,000 for a down payment on a house,” try breaking it up into “saving $2,500 each quarter” to make the goal seem less daunting, even though you’ll still be working towards achieving your original goal. Determining items like these and more from the start will make it easier to stick to the goal no matter what comes your way.

3) Track your progress.

Even if you put your action items for your goals on autopilot, you should still be tracking your progress on a regular basis. Recording your progress, either by using a journal, spreadsheet, or something else, can help you to stay on track by measuring what you have completed. Pick a method that you’ll be able to easily access and update as regularly as you think is necessary—weekly, monthly, quarterly, etc.

Be sure to also denote any outlying factors that occurred throughout the previous period that may have either helped or hindered your progress. This is also an ideal time to evaluate if the plan that you originally set in place is working or if adjustments need to be made. An important part of sticking to your goals is not wavering if things don’t go as planned. If other factors have caused a delay in your progress, adjust and keep going.

4) Evaluate at year end.

Set a date to review all the progress you’ve made at the end of the year, perhaps with your financial advisor and spouse or significant other. Reviewing the steps you have taken to achieve your goals and assessing your work will be a rewarding end to the year, even if you still have some work to do. It can also help you to set new goals for the coming year by considering what worked and what did not throughout the process.

Whatever your resolutions or goals are for the coming year, put some thought into nailing down a process that will work for you and your household to strive for financial fitness. Happy 2018!

Interested in discussing this topic further with a financial advisor? With offices in 23 states, there is likely a North Star financial advisor near you. Contact an advisor here.

Written by North Star Resource Group.

1 “12/20: Being a Better Person & Weight Loss Top 2018 New Year’s Resolutions.” Marist Poll. Published December 2017. maristpoll.marist.edu.

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